The EUR/USD reacted to the announcement of a 75 basis point interest rate hike by the Fed with a drop of more than 60 pips that led him to new twenty year lows at 0.9813. Subsequently, the pair recovered ground, ending Powell’s speech at the 0.9910 zone.
The United States Federal Reserve met expectations and raised its rates to 3.25%, as expected, but the dot plot projections warned that Fed members were estimating rates of 4.6% by the end of 2023, a much higher figure to 3.8% projected the previous time.
The dollar soared to 111.57, its highest level since June 2002. The DXY index which measures the greenback moderated minutes later, now trading above 111.00, gaining 0.74% on the day.
For his part, Fed Chairman Jerome Powell warned that the dot plot projections do not represent a plan or commitment. Although he was firm in his fight against inflation, emphasizing that the economy does not work without price stability, he also pointed out that decisions will continue to be made meeting by meeting, depending on the data and the outlook.
As traders digest the data, the focus now shifts to tomorrow’s session, as it will be marked by the monetary policy decision of the Bank of Japan and the Bank of England.
EUR/USD Levels
With the pair trading above 0.9888 at time of writing, shedding 0.83% on the day, major support appears at the psychological level 0.9800. If we break below, we could see an acceleration of the decline towards 0.9729, floor November 2002. Below wait 0.9612minimum of September of that same year.
To the upside, any recovery requires a solid move above 0.9900 that can lead the pair to think about recovering the parity zone 1,0000. Above expect the maximum of the week 1.0050 registered yesterday.
Source: Fx Street
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